Gasoline prices headed higher as government reduces subsidy; Public employees take a hit too

Dec 19, 2018

The cost of regular gasoline is headed higher.

Finance Minister Richard Martinez announced Tuesday that the price for the lower-octane gasoline used by most Ecuadorian motorists, the “Extra” and “Ecopais” brands, will increase by 37 cents a gallon, from $1.48 to $1.85.

Gasoline prices are headed higher.

In August, the government hiked the price of high-octane “Super” from an average of $2.19 to $2.98 a gallon.

According to Martinez, the decision to raise prices was made by President Lenin Moreno as part of his plan to reduce the national budget deficit. “The subsidies to fuel are a huge burden on the national economy,” he said, adding that before the price increase of Super, the overall subsidy amounted to almost $4 billion annually.

Martinez said that the Extra and Ecopais subsidy will remain in force for taxis and other means of public transportation. “Our intention is to cause the least disruption as possible for public transportation. We want to keep the cost for the public sector stable,” he said.  The subsidy for diesel fuel, used by most buses, as well as that for LP gas, will also remain in effect, he said.

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According to preliminary figures, the reduction of the subsidy for both high- and low-octane gasoline will amount to annual government savings of about $500 million.

Even with the increase, Martinez said the cost of gasoline in Ecuador will remain significantly below that of neighboring Peru and Colombia and the worldwide average, $3, $2.90 and $4.70 respectively.

In addition to reducing the budget deficit, Martinez said Moreno is concerned that fuel subsidies are reducing the amount of government money available for social programs. “The president’s top priority is funding programs for the poor and disadvantaged population and the cost of fuel subsidies is putting pressure on that funding,” he said.

In another cost-cutting measure announced Tuesday, Labor Minister Raúl Ledesma said that the salaries of all public officials will be reduced by five to 10 percent in 2019. “In our efforts to stabilize the government’s budget, we are requiring that all employees participate in the sacrifice. We hope the measure is temporary but it is necessary under current circumstances.”

The new salary reduction is in addition to a 10 percent cut announced earlier in the year.

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